Los Angeles Coming of Age

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October 31, 2016 / By Daniel Flaming

Cities that have come of age are able to make decisions that shape their own future and safeguard their own well-being. One critical measure of Los Angeles’ standing is its capability to taking actions that influence the economy in ways that help residents earn sustaining livelihoods.

Many of the workers whose energy and hope is driving LA’s economic growth are surviving at the margins of the economy, struggling to pay rent, and trying to build better lives for these children.

The industrial context for an economic strategy is a business base with growth concentrated in the service sector and polarized between high- and low-wage jobs. Los Angeles does not have enough growing industries that pay living wages.

A long-term, fact-based plan for community and regional industry growth
Not just project-specific development, although this is important

Tools for implementing an evidence-based economic strategy include:
1. Understanding industry strengths and monitoring trends in key industries.
2. Making land use decisions that support growth of industries that benefit the public balance sheet.
3. Fostering attentive, informed interaction with key industries.
4. Preserving a stable and competitive environment for key industries.
5. Intervening in measured ways to avert decline in key industries.
6. Using government purchasing power to support growth in key industries.
7. Prioritizing infrastructure improvements to help key industries.
8. Using strategic assets such as the ports to leverage local value-added activity and jobs.
9. Taking measured, efficient steps to make business capital available to targeted industries in targeted communities.
10. Helping residents get good jobs through training and employment initiatives.

How much impact can Los Angeles have on its economy with these tools? Will it be picking losers and winners? The short answer is that at best the city will give gentle nudges to its economy. If these nudges are judiciously targeted and consistent they can have a modest long-term effect in helping steer the economy in the right direction.

The resources of local government are not large enough to control or even have a near-term influence on LA’s economy. Los Angeles County has roughly:

$1 trillion in assessed property

$750 billion in annual industry output

$450 billion in local value created annually

$250 billion in annual compensation to workers

$170 billion in annual business income

In contrast, less than $1 billion is spent annually by all local governments in Los Angeles County for activities typically associated with economic development – job training, economic development and redevelopment. These direct outlays for economic development and revitalization amount to one-tenth of one percent of LA’s economic output. They are too small to be discernable in the overall economy. The most important tools of local government for shaping the economy are indirect but potentially powerful. Local government’s authority over land use, education and the labor market can have a powerful long-term influence in shaping the largest components of the economy.

An economic strategy is at best likely to achieve incremental rather than definitive change, but without it the city will face increased risks of ongoing economic stagnation and high levels of poverty.